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Friday, March 30, 2012

Microsoft posts $300 million bond in Motorola Mobility spat

The company says it has offered the cash as a way to guarantee the possibility of Motorola's lost revenue in the event Microsoft loses a patent-infringement case with the mobile company.

Microsoft and Motorola Mobility are nearing two key decisions on patent infringement. But the software giant might have just played an important card to keep its products on store shelves.

Microsoft yesterday filed a motion for a temporary restraining order and preliminary injunction against Motorola Mobility, barring it from banning the software giant's products from use in Germany until a U.S. court also rules on the matter. To make it right, Microsoft says that it will offer up a $300 million bond to guarantee any lost revenue Motorola might incur by allowing the software company's products to remain available.

FOSS Patents' Florian Mueller was first to report on this story.

The issue is a complicated one that includes a court in Washington State and another in Mannheim, Germany. Motorola is suing Microsoft, arguing that it infringes its video standard H.264 patents in Windows 7, the Xbox 360, and Internet Explorer. According to Mueller, the German court is expected to rule on the issue on April 17, and is very likely to side with Motorola.

Back in the U.S., Microsoft has found an opening, thanks to Judge James L. Robart saying earlier this month that it could stop Motorola from banning its products, as long as it posted a bond. That said, a hearing on the matter will be held on April 20, according to Mueller.

Motorola's H.264 patents are "essential," meaning they are governed by Europe's FRAND (fair, reasonable, and nondiscriminatory) terms. Companies that hold FRAND patents are expected to make licensing terms fair and reasonable to companies that need them. For its part, Microsoft says that Motorola isn't offering its patents on a FRAND basis.

"In legal proceedings on both sides of the Atlantic, Motorola is demanding that Microsoft take its products off the market, or else remove their standards-based ability to play video and connect wirelessly," Microsoft vice president and deputy general counsel Dave Heiner wrote in a blog post last month. "The only basis for these actions is that these products implement industry standards, on which Motorola claims patents. Yet when the industry adopted these standards, we all were counting on Motorola and every contributor to live up to their promises."

Heiner went on to say that his company currently uses 50 of Motorola's H.264 patents, and must pay the company $22.50 in royalties for each $1,000 laptop. Heiner also said that his company licenses 2,300 H.264 patents from 29 other companies, and pays just 2 cents for those for every $1,000 laptop.

For its part, Motorola has said time and again that it wants to license patents with any and all companies that come along, and views litigation as a final option. In a similar case with Apple over essential patents, Motorola said that it was left "with no option other than to seek to enforce the company's rights and patent portfolio."

Both the German and U.S. courts are expected to rule on the cases between Motorola and Microsoft next month. After that, though, don't expect the fight to be over. If history is to be our guide, these fights don't end quickly and usually come with a host of appeals.

Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. In addition to writing for CNET, Don writes product reviews for InformationWeek and is a regular contributor to Processor Magazine.